Save Article

Converium Profit
Rose in Quarter;
Dividend Planned

By

Martin Gelnar

Updated March 16, 2006 12:01 a.m. ET

Swiss reinsurer Converium Holding AG , which reported fourth-quarter net profit tripled, said it would pay a dividend again for 2005 and that it expected further improvement this year on hopes of a credit-rating upgrade.

Converium reported fourth-quarter net profit of $34.2 million, up from a net profit of $10.9 million in the year-earlier period.

Converium said net profit for 2005 reached $68.7 million after a year-earlier loss of $582.5 million due to reserve additions for its troubled U.S. business. Converium was able to balance losses worth $164.8 million linked to last year's hurricane season with strong investment gains and further cost cuts.

"After my first six weeks at the helm of Converium I am convinced that our franchise is stable, our business strategy appropriate and our underwriting expertise top class," said Chief Executive Officer Inga Beale, who replaced interim Chief Executive Terry Clarke, who will leave the company later this year.

Converium said its ongoing non-life combined ratio improved to 110.8% in the fourth quarter from 120.2% the year before. However, for the full year it deteriorated to 107.2% from 106.1% in 2004. A combined ratio measures profitability and a figure above 100% indicates an underwriting loss.

Full-year net profit was boosted by a $60.5 million gain from its U.S. business, which the company is winding down after massive reserve problems linked to liability reinsurance contracts forced it to close to new business. The gains were linked to portfolio transfers, so-called commutations, to other insurers.

Due to the strong results and expectations for further operational and financial improvement in the ongoing year, Converium will resume a dividend payment of 0.1 Swiss franc a share after a one-year hiatus. In 2003, the company paid a dividend of 1.5 francs a share. Analysts welcomed the figures, saying Converium had been able to handle the fallout from last year's record hurricane season, which cost the insurance and reinsurance industry $80 billion.

Converium recently had to restate earnings for 1998 to 2004 as part of an internal investigation linked to an industrywide probe into questionable reinsurance products. Mr. Beale said the internal audit cost the reinsurer about $15 million.

Converium's credit rating was cut in 2004 in the aftermath of the reinsurer's reserve problems in the U.S. that forced the company to take up fresh capital by issuing new shares. The company has a triple-B rating by most agencies.

The rating is too low to attract the largest of business contracts and was the main reason behind Converium's sharp drop in 2005 premiums -- which fell to $1.99 billion from $3.98 billion the previous year.

Swiss financier Martin Ebner, who holds a 12.49% stake in the company, recently said he was likely to increase his stake this year if Converium received a higher credit rating.

Converium Profit
Rose in Quarter;
Dividend Planned

Swiss reinsurer Converium Holding AG , which reported fourth-quarter net profit tripled, said it would pay a dividend again for 2005 and that it expected further improvement this year on hopes of a credit-rating upgrade.